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The good news about the poverty data is that this is likely as bad as it gets. There are some observations from the last economic cycle that we need to pay attention to, as we warily embark on a new economic journey.
First, the poverty rates are just a symptom of a structural problem of low-wage jobs in the region. The latest figures from the 2009 American Community Survey show that poverty rate in the San Diego region increased in the two-year period from 11.1 percent in the pre-recession 2007 to 12.6 percent in 2009. This is about 50,000 additional San Diegans slipping below the federal poverty threshold.
The federal poverty threshold is at $10,956 for a single adult, and $21,954 for a family of four, a threshold that is “almost absurd” for the high cost of living in San Diego. Even more absurd is the idea of making a living at a minimum wage. At $8 an hour, working full-time year-round an individual makes less than $17,000 a year, falling $10,000 short to meet basic necessities like housing, food, transportation and healthcare. Yet since 1990, for every high-paid worker, the region has created 24 low-paid workers.
Second, employers in San Diego pay the lowest wages among major metros in the nation, when adjusted for cost of living (according to SANDAG). This results in a teardrop-shaped economy where the hard working middle-class is being pushed downward, as wages and working hours are cut. A more contextual measure of economic hardship is the number of individuals below 200 percent of the federal poverty level, which is closer to the self-sufficiency thresholds for San Diegans to make ends meet. Census data reveals that 890,000 residents in the county (30 percent) live in economic hardship, a figure that has increased by a 100 thousand since the recession began, between 2007-09.
Third, workers are also consumers that make the local economy churn. As incomes fall, business declines. Even more intriguing is that incomes in the county fell across all income levels. The median household income in the region fell 6 percent to $60,000 with the middle household taking a $3,700 cut in income between 2007-09. This directly results in a cutback in spending for every household.
Per capita income, and the median income for every quintile fell during the last year. At the same time, the structural inequality in the region remained high, with the top quintile (at $196K) making half of the aggregate household income, which is almost 14 times the aggregate income of the bottom quintile (making $14,539). This is important because income inequality limits income mobility as evidence by stagnating incomes, even when Wall Street was booming. It led to the great divergence nationally as the rich ate a greater share of the economic pie, which was cooked by the increasing productivity of the rest of us.
The economic tide that brought us into this swamp was not an accident. Our leadership was sleeping at the wheels of economic stewardship. During the last decade of boom and bust, the region was riding on the wings of invisible spirits singing ideological somniloquy, sprinkled with some real estate fairy-dust.
Going forward, policy makers, educators, workforce trainers, labor and employers need to do things differently to adopt to a new economy — one that prepares San Diegans for better-paying, future-oriented and non-exportable industries. These workers need the opportunity, skills and minimum employment standards that will drive our region towards prosperity at every strata. It is a paradigm shift that needs to happen now. If the results of the failed economic experiment of the past decade make us wiser in our approach to rebuilding the economy, that is indeed good news.
Murtaza Baxamusa lives in Ocean Beach and is the Research and Policy Director for the Center on Policy Initiatives.